In 2018, Americans spent an average of $7,296 on their personal insurance and pensions. That’s on top of the average $3,405 they spent towards health insurance.
This means that the average 2018 spending on all types of insurance plans was $10,701. That represents 13.6% of their average income before taxes.
The question now is, what exactly are these insurance plans that Americans spend so much money on? Most importantly, what kind of protection do they even provide that makes them a must in your life?
We’ll answer all these questions in this post, so keep reading to find out!
1. Health Insurance
In 2018, Americans spent $3.65 trillion on health care alone. This puts the US on the third spot of countries with the highest health care costs.
A health insurance plan can protect you from pricey out-of-pocket health care costs. This is also one of the reasons that health coverage is still mandatory in some states like New Jersey.
Even if you live in a state where health insurance is no longer required, you should still invest in a plan. However, check with your employer first, since a health plan may be part of your benefits package. In fact, over 50% of US workers get their health coverage through their employers.
If you do have an employer-issued health plan, make sure that its coverage is enough for your health needs. If it’s not, then consider getting supplemental health insurance coverage.
2. Dental Insurance
In 2017, Americans took out a total of $53 billion from their own pockets to pay for dental services. That’s almost $6 billion more from their 2013 out-of-pocket dental care costs.
What’s more, most standard medical health plans, like Medicare, doesn’t cover dental care. Medicaid offers dental coverage, but only as a separate or optional coverage.
This makes a dental plan one type of insurance coverage you shouldn’t go without. Dental policies provide coverage for both preventative and medically necessary services. Some plans even offer to pay a portion of orthodontic services, such as dental braces.
3. Car Insurance
Other than in New Hampshire and Virginia, car insurance is mandatory in all other states. Still, NH motorists are legally responsible to pay for damages that they cause. In VA, car owners can pay the $500 Uninsured Motor Vehicle Fee, but they’ll still be liable if they cause an accident.
In no-fault states like Florida and Hawaii, motorists need to get no-fault PIP coverage. PIP stands for personal injury protection. It covers medical treatment and property damage, regardless of who caused the crash.
Either way, the fact that auto insurance is the law in most states should be enough reason for you to get it. Your wallet will thank you for it in case you get into a serious accident.
4. Homeowners’ Insurance
The government may not require homeowners’ insurance, but most mortgage lenders do. Meaning, new home buyers need to purchase this type of insurance policy if they want to secure a home loan.
Whether it’s required or not, you should still get homeowners’ insurance. After all, it protects your home from losses and damages caused by insured perils. These “perils”, or disastrous events, include fires, theft, windstorms, and hail among others.
From the structure to its contents, home insurance will cover the cost to repair or replace them. Moreover, even the basic insurance coverage for homes provide liability protection.
5. Flood Insurance
Flood insurance is mandatory for some homes located in a Special Flood Hazard Area (SFHA). These include homes purchased through a federal loan, such as FHA home loans.
Homes that don’t fit the bill should still carry flood insurance though. A good enough reason is the fact that all states have seen at least two major floods in the last decade. High-tide flood frequency has also increased by 100% from 30 years ago.
Flood insurance, unfortunately, isn’t included in most standard homeowners’ insurance plans. If you don’t get a separate flood insurance plan, you’ll have to shoulder all the costs to repair flood damage. You’ll also be responsible for replacing all flood-related losses.
6. Workers’ Compensation
138 million US employees have workers’ compensation, which in most states, is the law. It’s only in Texas where this coverage isn’t mandatory for private employers.
Still, many states only require employers to get this if they have several employees. Meaning, if your company doesn’t meet this “threshold”, then you may be without workers’ comp. You may also be without this coverage if you’re self-employed or you only contract work.
Either way, you should purchase workers’ comp to protect you from work-related accidents. This insurance will cover your medical expenses and lost wages if you get injured or ill due to work.
7. Disability Insurance
Disability insurance protects part of your salary if you get disabled and unable to work. You can choose between a short-term or a long-term plan. The former can pay (part of) up to six months’ worth of your salary, while a long-term plan can cover you for more than that.
8. Life Insurance
Six in 10 Americans have some form of life insurance, even though 85% believe that most people need it. While it’s definitely not mandatory, it’s one of the types of insurances you should invest in.
For starters, a life policy can help safeguard the financial future of your loved ones. For instance, your policy’s cash payout may be enough to cover the remaining debts you owe on your home loan. In this way, your family can repay the mortgage and keep living in that house.
There are even some life insurance plans that let you build wealth over time. These cash value life policies put a part of your premiums towards a savings account. After several years, you can withdraw or borrow from the account for personal reasons. When you are older, you may also be eligible to sell your life insurance policy for cash, which can be used to fund retirement, pay for long-term care or medical expenses, and more.
9. Pet Insurance
67% of US households — that’s 85 million families in total — share their homes with a pet. These families spent an estimated $75.38 billion on their pets in 2019. 25% of that spending went towards vet care alone.
Veterinary medicine, after all, is now a lot safer and more effective, and thus, more expensive.
The good news is, pet insurance can offset some of the high costs of vet med. Most plans already cover the costs of diagnosis and a portion of the costs of treatments. These reduced pet care expenses can make it easier to manage your furry pal’s health.
Don’t Risk It: Get These Most Important Types of Insurance Plans Now
There you have it, your ultimate guide on the types of insurance plans that you shouldn’t go without. Even if most of them aren’t “mandatory”, they are still worth every penny. Just make sure that you get the right amount of coverage so you can avoid being under- or over-insured.
Ready for more life pro tips to get your health and finances in check? Then be sure to check out (and bookmark) this site’s Health and Lifestyle sections!